How much better off are we?

[contractor79]

did you find it a shock initially to be on so much money so soon

in my previous permie jobs I was on early 20s salary but can now earn that in a couple of months

it's a bit of a shock

[Lewis]

In my experience, banks willing to pay contractors £500-£600 per day will take them on permanently for around £60K-£70K with pension, bonus etc. Add on a generous 20% for bonus and pension, take the top figure and call it £92K salary.

The rough take home for £600 p/day contract with some income shifting = £600 * 5 days * 45 weeks * 80% takehome = £108,000. A £92K permanent salary will give you £60K after tax (i-resign.com). So by contracting you can get almost double the actual take home pay.

To take home £108K you would need a permi salary of £170K. So contracting gives you almost three times the pre-tax amount.

Now clearly these figues are rough and include income shifting but you get the point. I pay £1K for family to have BUPA. I get no sick pay, holiday pay etc.. I have little chance of moving up the management chain to get the really big salaries. But I would pick contracting any day of the week!

[Old Greg]

I have little chance of moving up the management chain to get the really big salaries. But I would pick contracting any day of the week!

I am so happy to get out of the career pole climbing cr@p. I was never any good at becoming matey with the influential people and getting into the important working groups. When my permie colleagues go off to meetings to hear about the latest flexible working initiative, I smile quietly to myself and book another holiday.

[contractor79]

I'd say about twice as well off, apart from a pension, but I have my own plans for this and I'd rather benefit from having 'money' now which I can choose to use as I feel, rather than it being locked away and non accessible until I'm 65 (god I'm not even 30 yet)...

you can take it out at 55
more you put in now less you need to later

[ASB]

In my experience, banks willing to pay contractors £500-£600 per day will take them on permanently for around £60K-£70K with pension, bonus etc. Add on a generous 20% for bonus and pension, take the top figure and call it £92K salary.

The rough take home for £600 p/day contract with some income shifting = £600 * 5 days * 45 weeks * 80% takehome = £108,000. A £92K permanent salary will give you £60K after tax (i-resign.com). So by contracting you can get almost double the actual take home pay.

To take home £108K you would need a permi salary of £170K. So contracting gives you almost three times the pre-tax amount.

Now clearly these figues are rough and include income shifting but you get the point. I pay £1K for family to have BUPA. I get no sick pay, holiday pay etc.. I have little chance of moving up the management chain to get the really big salaries. But I would pick contracting any day of the week!

You'd struggle to get those figures even with income shifting to one partner. You've both gone into the higher rate band.

Assuming inside IR35/brolly then 50k salary plus "normal" benefits is pretty much equivalent to a 325-350 contract.

[contractor79]

I am so happy to get out of the career pole climbing cr@p. I was never any good at becoming matey with the influential people and getting into the important working groups.

I hated that too. Think if you're very good at what you do you can be seen as a threat and kept down.

[Lewis]

You'd struggle to get those figures even with income shifting to one partner. You've both gone into the higher rate band.

Assuming inside IR35/brolly then 50k salary plus "normal" benefits is pretty much equivalent to a 325-350 contract.

Ok, my figures were quick and nasty but they are not wildly off even going into the higher rate bracket as you say.

A more detailed (but still quick and nasty) calculation would be as follows .... take the gross amount of £600 * 5 days* 45 weeks = £135K. Add on £1K bank interest and about £4K from FRS VAT gains. Total in = £140K.

Let's assume £4K expenses and deduct two salaries at £5K, this gives profit of £126K. Corporation tax at 21% leaves roughly £100K for dividends. Income shifting you can get out around £35K in dividends each. So ... we now have around £84K out of the company in total.

We have £30K of dividends left, which is going to have to go into the higher dividend rate of 32.5%. So let's take it now (in reality you would probably leave it in the company) and pay the £7.5K extra tax. So we now have £106K out of the company (£10K salaries, £70K dividends @0% tax, £4K expenses and £22.5K higher rate divs).

Not far from the £108K.

[Lewis]

Assuming inside IR35/brolly then 50k salary plus "normal" benefits is pretty much equivalent to a 325-350 contract.

I would say a £325 p/day contract is closer to a £100K salary with no benefits or £85K with "normal" benefits. Real world working through a Ltd you should be taking home at least 70% and can easily go into the low 80s using income shifting.

Even being extra conservative ....
£325 * 5 days * 45 weeks * 70% take home = £51K after tax
That is equivalent to an £80K permanent salary. (using i-resign.com tax calculator which works out after tax figures for permanent salaries http://i-resign.com/uk/financialcent...lator_tool.asp).

[chris79]

did you find it a shock initially to be on so much money so soon

in my previous permie jobs I was on early 20s salary but can now earn that in a couple of months

it's a bit of a shock

I think what I get for my age is fantastic, I don't know many people <30 on the money I get, not that I tell people I keep it all quiet - best way really. But yes, I had a huge jump in money in terms of what I was getting say just a few years ago. I earn more money now myself than me and my partner used to earn combined, which is handy as she's not working and looking after our 2 little ones until they reach school.

Having contracted now for 2 years I MUCH prefer it over permie roles, it's a bit more risky, but if you are switched on and can sell yourself well for the skills and abilities you have to offer, then it's worth taking the risk I think. I think it would have to take something big to get me back in a perm role, I enjoy being separated from all the line management and office politics that you find in most places. If anything it's also taught me how to 'run a business', i.e. my Ltd Co. as I do everything myself, accounts, returns, invoices, payroll, etc. I can use these skills to run any business of my choosing in the future if I ever decide to do something different.

It does draw a bit of resentment from the perms I work with, I've heard a few things like "scummy contractors", or "agency staff" comments etc, but I really don't care when I send in my invoice and check my business account.

[contractor79]

I think what I get for my age is fantastic, I don't know many people <30 on the money I get, not that I tell people I keep it all quiet - best way really. But yes, I had a huge jump in money in terms of what I was getting say just a few years ago. I earn more money now myself than me and my partner used to earn combined, which is handy as she's not working and looking after our 2 little ones until they reach school.

Having contracted now for 2 years I MUCH prefer it over permie roles, it's a bit more risky, but if you are switched on and can sell yourself well for the skills and abilities you have to offer, then it's worth taking the risk I think. I think it would have to take something big to get me back in a perm role, I enjoy being separated from all the line management and office politics that you find in most places. If anything it's also taught me how to 'run a business', i.e. my Ltd Co. as I do everything myself, accounts, returns, invoices, payroll, etc. I can use these skills to run any business of my choosing in the future if I ever decide to do something different.

It does draw a bit of resentment from the perms I work with, I've heard a few things like "scummy contractors", or "agency staff" comments etc, but I really don't care when I send in my invoice and check my business account.

think we're in a very similar situation
though I'm not in a relationship... and I do keep it quiet what I earn especially from the girlies